Which of the Following Best Explains What Will Happen in the Short

question 81

Multiple Choice

Which of the following best explains what will happen in the short run if government purchases increase?

• A)Real GDP, consumption, and investment will increase.
• B)Potential GDP will increase.
• C)Real GDP and consumption will increase.
• D)Real GDP will increase.
• E)All of these

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Definitions:

Cost of Capital

The yield a corporation needs to generate from its investment initiatives to keep its market valuation steady and draw in financing.

Stand-Alone Project

In capital budgeting, a project with no competition either for the task it is to accomplish or for resources.

Cost of Capital

The rate of return a company must pay to its investors for the use of their capital, essentially the cost of financing and investing in the company's assets.

NPV

Net present value. A capital budgeting technique that rates projects according to the total present value of all their associated cash flows. The higher the total or net present value, the better.